Office of the Attorney General
State of Texas

Re: Whether a school district's purchases of
gasoline for use by an independent contractor in
the provision of transportation services for the
school district are exempt from the gasoline
tax (RQ-497)

Dear Representative Campbell:

You have requested our opinion regarding the state tax "on the first sale or use of
gasoline in this state." Tax Code § 153.101(a). The tax law provides an exemption from
the taxation for fuel sold "to a public school district in this state for its exclusive use."
Id. § 153.104(7). You ask whether a Texas school district that contracts with a private
transportation company to provide school bus service may avoid the state gasoline tax by
directly purchasing the fuel to be used in the private buses in the provision of such
service.

In Attorney General Opinion No. JM-1158 (1990), this office construed the
statutory exception from taxation contained in section 153.104(7) to mean

that gasoline purchased by a school district or by the agent of a
school district for the exclusive use of a school district will be
exempt from the reach of the tax. Gasoline purchased by an
independent contractor that performs services for a school district,
however, will not be exempt from the reach of the tax.

Id. at 1-2. We did not reach in that opinion the situation in which the school district
purchases gasoline and provides it to an independent contractor who uses the gasoline in
the performance of services for the school district. Such a situation would literally be a
sale "to a public school district in this state," Tax Code § 153.104(7); but would it be a
sale "for [the] exclusive use," id., of the school district?

The Comptroller of Public Accounts has adopted the following regulation
defining "exclusive use" as that phrase is used in subsection (7):

Definition. The term "exclusive use" by a school district means
fuel purchased by a school district and used only in motor vehicles
or other equipment:

(A) owned and operated by the district; or

(B) dedicated for the exclusive and sole purpose of providing
transportation services for the school district by means of a contract
between the school district and the owner or operator of the motor
vehicles.

34 T.A.C. § 3.173(14). The comptroller's definition includes gasoline used in vehicles
owned and operated by independent contractors so long as the gasoline (1) is purchased
directly by the school district and (2) is used only for providing transportation services
for the school district.

The comptroller adopted the above-quoted amendment to section 3.173 of the
Texas Administrative Code pursuant to authority delegated by the legislature in section
111.002 of the Tax Code. The comptroller proposed the amendment, 16 Tex. Reg. 5720
(1991), and made it final, id. at 6756, in accordance with the Administrative Procedure
and Texas Register Act, V.T.C.S. art. 6252-13a. The comptroller thus promulgated the
regulation pursuant to delegated authority and in accordance with the procedural
requirements.

The comptroller's construction of exclusive use is reasonably consistent with the
purpose of the statute. Subsection (7) was added in a House floor amendment to Senate
Bill 417 in the 71st Legislature. H.J. of Tex., 71st Leg., at 2422 (1989). In proposing
the amendment, Representative Culberson stated its purpose to be to "help school
districts offset the costs of transportation under [S.B. 417]." Debate on S.B. 417 on the
Floor of the House of Representatives, 71st Leg. (May 25, 1989) (tape recording
available from House Committee Coordinator).

We believe that a court would defer to the comptroller's construction because
there are no "clear and compelling reasons" to conclude that the administrative
construction is erroneous. "Construction of a statute by the agency charged with the
execution and administration thereof is authoritative and should be followed by the
courts unless there are clear and compelling reasons that such construction is erroneous."
Bateman v. Rice, 653 S.W.2d 951, 952 (Tex. App.--Amarillo 1983, writ ref'd n.r.e.).

We conclude that the school district exemption from the gasoline tax applies to
gasoline purchased directly by a school district and used by independent contractors
solely for the provision of transportation services to the district.

SUMMARY

The school district exemption from the gasoline tax, Tax Code
section 153.104(7), applies to gasoline purchased directly by a
school district and used by independent contractors solely for the
provision of transportation services to the district.